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Church & Dwight(CHD) - 2024 Q3 - Quarterly Report
CHDChurch & Dwight(CHD)2024-11-01 19:49
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Financial Performance - Net loss for Q3 2024 was 75.1million,comparedtoanetincomeof75.1 million, compared to a net income of 177.5 million in Q3 2023[6] - Comprehensive loss for Q3 2024 was 64.2million,comparedtoacomprehensiveincomeof64.2 million, compared to a comprehensive income of 175.9 million in Q3 2023[6] - Net income for Q3 2024 was 177.5million,comparedto177.5 million, compared to 203.2 million in Q1 2023 and 221.2millioninQ22023[12][13]−NetincomefortheninemonthsendedSeptember30,2024,was221.2 million in Q2 2023[12][13] - Net income for the nine months ended September 30, 2024, was 396.1 million, down from 601.9millionintheprioryearperiod[10]−NetsalesforthethreemonthsendedSeptember30,2024increasedby3.8601.9 million in the prior year period[10] - Net sales for the three months ended September 30, 2024 increased by 3.8% to 1,510.6 million compared to 1,455.9millioninthesameperiodin2023[84]−GrossprofitforthethreemonthsendedSeptember30,2024increasedby5.71,455.9 million in the same period in 2023[84] - Gross profit for the three months ended September 30, 2024 increased by 5.7% to 683.1 million, with gross margin improving by 80 basis points to 45.2%[84] - Net sales for the nine months ended September 30, 2024 were 4,525.1million,a4.34,525.1 million, a 4.3% increase compared to 4,339.9 million in the same period in 2023[85] - Gross profit for the nine months ended September 30, 2024 was 2,082.2million,a9.22,082.2 million, a 9.2% increase compared to 1,907.2 million in the same period in 2023[85] - Marketing expenses for the three months ended September 30, 2024 increased by 10.7% to 185.8million,representing12.3185.8 million, representing 12.3% of net sales, up 80 basis points from the same period in 2023[89] - SG&A expenses for the three months ended September 30, 2024 were 231.7 million, a 4.0% increase compared to 222.7millioninthesameperiodin2023[84]−TheeffectivetaxrateforthethreemonthsendedSeptember30,2024wasabenefitof25.9222.7 million in the same period in 2023[84] - The effective tax rate for the three months ended September 30, 2024 was a benefit of 25.9%, impacted by the non-cash VMS impairment charge[93] - Interest income for the three months ended September 30, 2024 increased by 6.1 million to 10.6million,primarilyduetothefavorableWaterpiktariffrulingandhigherinterestrates[92]CashFlowandLiquidity−Cashandcashequivalentsincreasedto10.6 million, primarily due to the favorable Waterpik tariff ruling and higher interest rates[92] Cash Flow and Liquidity - Cash and cash equivalents increased to 752.1 million as of September 30, 2024, up from 344.5millionattheendof2023[8]−NetcashprovidedbyoperatingactivitiesfortheninemonthsendedSeptember30,2024,was344.5 million at the end of 2023[8] - Net cash provided by operating activities for the nine months ended September 30, 2024, was 863.9 million, up from 795.1millioninthesameperiodof2023[10]−Netchangeincashandcashequivalentswas795.1 million in the same period of 2023[10] - Net change in cash and cash equivalents was 407.6 million for the nine months ended September 30, 2024, up from 303.0millioninthesameperiodof2023[10]−Cashequivalentsincreasedto303.0 million in the same period of 2023[10] - Cash equivalents increased to 571.9 million as of September 30, 2024, compared to 217.7millionasofDecember31,2023[37]−Netcashprovidedbyoperatingactivitiesincreasedby217.7 million as of December 31, 2023[37] - Net cash provided by operating activities increased by 68.8 to 863.9inthefirstninemonthsof2024,comparedto863.9 in the first nine months of 2024, compared to 795.1 in the same period in 2023, primarily due to higher cash earnings[118] - Net cash used in investing activities was 138.1inthefirstninemonthsof2024,primarilyforproperty,plant,andequipmentadditions(138.1 in the first nine months of 2024, primarily for property, plant, and equipment additions (125.2) and the Graphico Acquisition (19.9)[119]−Netcashusedinfinancingactivitieswas19.9)[119] - Net cash used in financing activities was 318.3 in the first nine months of 2024, reflecting 200.4innetdebtpaymentsand200.4 in net debt payments and 207.4 in cash dividend payments, partially offset by 90.3fromstockoptionexercises[119]−Thecompanyanticipatescapitalexpenditureprogramcostsofapproximately90.3 from stock option exercises[119] - The company anticipates capital expenditure program costs of approximately 180.0 in 2024, primarily for manufacturing capacity investments in laundry and litter to support future sales growth[117] - The company repaid the remaining 200.0ofitsTermLoandueDecember22,2024,withcashonhandinQ12024[114]AssetsandLiabilities−Totalcurrentassetsroseto200.0 of its Term Loan due December 22, 2024, with cash on hand in Q1 2024[114] Assets and Liabilities - Total current assets rose to 2,016.7 million as of September 30, 2024, compared to 1,529.7millionattheendof2023[8]−Accountsreceivableincreasedto1,529.7 million at the end of 2023[8] - Accounts receivable increased to 555.3 million, up from 526.9millionattheendof2023,indicatinghighersalesactivity[8]−Inventoriesgrewto526.9 million at the end of 2023, indicating higher sales activity[8] - Inventories grew to 658.5 million, up from 613.3millionattheendof2023,reflectingincreasedproductionorslowersalesturnover[8]−Totalliabilitiesdecreasedto613.3 million at the end of 2023, reflecting increased production or slower sales turnover[8] - Total liabilities decreased to 4,472.5 million, down from 4,713.8millionattheendof2023,primarilyduetoreductionsincurrentliabilities[8]−Long−termdebtasofSeptember30,2024,is4,713.8 million at the end of 2023, primarily due to reductions in current liabilities[8] - Long-term debt as of September 30, 2024, is 2,208.2 million, compared to 2,202.2millionatDecember31,2023[62]−Thecompany′sshort−termborrowingsasofSeptember30,2024,decreasedto2,202.2 million at December 31, 2023[62] - The company's short-term borrowings as of September 30, 2024, decreased to 3.4 million from 3.9millionatDecember31,2023[62]−AccountspayableasofSeptember30,2024,increasedto3.9 million at December 31, 2023[62] - Accounts payable as of September 30, 2024, increased to 705.9 million from 630.6millionatDecember31,2023[60]−Thecompany′sleaseliabilitiesasofSeptember30,2024,total630.6 million at December 31, 2023[60] - The company's lease liabilities as of September 30, 2024, total 201.3 million, with current lease liabilities at 30.4millionandlong−termleaseliabilitiesat30.4 million and long-term lease liabilities at 170.9 million[58] - Lease costs for the nine months ended September 30, 2024, amounted to 29.8million,comparedto29.8 million, compared to 23.5 million for the same period in 2023[58] - The company's minimum annual rentals under lease agreements, including reasonably assured renewal options, total 241.2million,withthepresentvalueofleaseliabilitiesat241.2 million, with the present value of lease liabilities at 201.3 million[59] Impairments and Amortization - Tradename and other asset impairments were 357.1millionfortheninemonthsendedSeptember30,2024,comparedto357.1 million for the nine months ended September 30, 2024, compared to 0.0 million in the same period of 2023[10] - The company recorded a 281.3millionimpairmentchargefortheVITAFUSIONandL′ILCRITTERStradenamesduetodecliningmarketshareandprofitability[50][51]−Thecompanyrecordeda281.3 million impairment charge for the VITAFUSION and L'IL CRITTERS trade names due to declining market share and profitability[50][51] - The company recorded a 75.8 million pre-tax impairment charge for long-lived assets supporting the VMS business, including 60.0 million for PP&E and 15.8 million for customer relationship intangible assets[52] - The total VMS impairment charges for the third quarter of 2024 amounted to 357.1 million, including trade name, customer relationship intangible asset, and PP&E impairments[54] - Intangible amortization expense for the third quarter of 2024 was 30.7 million, with an estimated annual expense of 117.0millionfor2024[47]−Intangibleamortizationexpenseforthefirstninemonthsof2024was117.0 million for 2024[47] - Intangible amortization expense for the first nine months of 2024 was 92.2 million, with an estimated annual expense of 117.0millionfor2024[47]AcquisitionsandDivestitures−ThecompanyacquiredGraphico,Inc.for117.0 million for 2024[47] Acquisitions and Divestitures - The company acquired Graphico, Inc. for 19.9 million, with annual net sales of 38.0millionin2023,aimingtoexpandintheAsia−Pacificregion[41]−ThefairvalueofGraphico′snetassetsatacquisitionincludes38.0 million in 2023, aiming to expand in the Asia-Pacific region[41] - The fair value of Graphico's net assets at acquisition includes 8.4 million for customer relationship intangible assets and 2.8millionforgoodwill[42]−ThecompanyacquiredHeroCosmetics,Inc.for2.8 million for goodwill[42] - The company acquired Hero Cosmetics, Inc. for 546.8 million, with annual net sales of 179.0millionin2022,managedintheConsumerDomesticsegment[43]−ThefairvalueofHero′snetassetsatacquisitionincludes179.0 million in 2022, managed in the Consumer Domestic segment[43] - The fair value of Hero's net assets at acquisition includes 400.0 million for the trade name and 156.1millionforgoodwill[44]−ThecompanysolditsPassportfoodsafetybusinessinthesecondquarterof2024forcashproceedsof156.1 million for goodwill[44] - The company sold its Passport food safety business in the second quarter of 2024 for cash proceeds of 6.6 million, resulting in a gain of 0.1million[81]−ThecompanyexitedtheMEGALACsupplementportionofitsAnimalNutritionbusinessinthefirstquarterof2024,withnetsalesfortheninemonthsendedSeptember30,2024being0.1 million[81] - The company exited the MEGALAC supplement portion of its Animal Nutrition business in the first quarter of 2024, with net sales for the nine months ended September 30, 2024 being 7.6 million compared to 29.7millioninthesameperiodin2023[80]SegmentPerformance−Thecompany′sConsumerDomesticsegmentgenerated29.7 million in the same period in 2023[80] Segment Performance - The company's Consumer Domestic segment generated 1,170.8 million in net sales for Q3 2024, compared to 1,133.1millioninQ32023[76]−Thecompany′sConsumerInternationalsegmentgenerated1,133.1 million in Q3 2023[76] - The company's Consumer International segment generated 267.7 million in net sales for Q3 2024, compared to 244.4millioninQ32023[76]−Thecompany′sSpecialtyProductsDivision(SPD)generated244.4 million in Q3 2023[76] - The company's Specialty Products Division (SPD) generated 72.1 million in net sales for Q3 2024, compared to 78.4millioninQ32023[76]−Thecompany′stotalconsolidatednetsaleswere78.4 million in Q3 2023[76] - The company's total consolidated net sales were 1,510.6 million for Q3 2024, compared to 1,455.9millioninQ32023[77]−ConsumerDomesticnetsalesincreasedby3.31,455.9 million in Q3 2023[77] - Consumer Domestic net sales increased by 3.3% to 1,170.8 million in Q3 2024 compared to Q3 2023, driven by growth in HERO® acne treatment products and ARM & HAMMER® baking soda[101] - Consumer International net sales grew by 9.5% to 267.7millioninQ32024,drivenbyOXICLEAN®stainremoversandTHERABREATH®mouthwash[103]−SPDnetsalesdecreasedby8.0267.7 million in Q3 2024, driven by OXICLEAN® stain removers and THERABREATH® mouth wash[103] - SPD net sales decreased by 8.0% to 72.1 million in Q3 2024 due to the exit of product lines, including the MEGALAC supplement and Passport food safety business[108] - Consumer Domestic loss before income taxes was (107.1)millioninQ32024,impactedbya(107.1) million in Q3 2024, impacted by a 327.4 million non-cash impairment charge[102] - Consumer International loss before income taxes was (4.7)millioninQ32024,impactedbya(4.7) million in Q3 2024, impacted by a 29.7 million non-cash impairment charge[107] - SPD income before income taxes increased by 1.2to1.2 to 7.4 in Q3 2024, driven by favorable price/mix (2.6),lowermanufacturingcosts(2.6), lower manufacturing costs (1.0), and reduced SG&A and marketing costs (0.5and0.5 and 0.1 respectively), partially offset by lower sales volumes (3.0)duetoproductlineexits[110]Stockholders′EquityandShareRepurchases−Totalstockholders′equitygrewto3.0) due to product line exits[110] Stockholders' Equity and Share Repurchases - Total stockholders' equity grew to 4,193.7 million as of September 30, 2024, up from 3,489.9millionattheendof2022[12][13]−Retainedearningsreached3,489.9 million at the end of 2022[12][13] - Retained earnings reached 6,200.9 million as of September 30, 2024, up from 5,524.6millionattheendof2022[12][13]−Additionalpaid−incapitalincreasedto5,524.6 million at the end of 2022[12][13] - Additional paid-in capital increased to 534.7 million as of September 30, 2024, from 366.2millionattheendof2022[12][13]−Treasurystockdecreasedto366.2 million at the end of 2022[12][13] - Treasury stock decreased to (2,817.4) million as of September 30, 2024, from (2,665.3)millionattheendof2022[12][13]−AsofSeptember30,2024,thereremains(2,665.3) million at the end of 2022[12][13] - As of September 30, 2024, there remains 658.9 million of share repurchase availability under the 2021 Share Repurchase Program[35] - The company declared a 4% increase in the regular quarterly dividend to 0.28375pershare,raisingtheannualdividendpayoutfrom0.28375 per share, raising the annual dividend payout from 267.0 to approximately 276.0[114]ResearchandDevelopment−Researchanddevelopmentexpensesincreasedto276.0[114] Research and Development - Research and development expenses increased to 36.0 million in Q3 2024 from 30.3millioninQ32023[16]Stock−BasedCompensation−Stock−basedcompensationexpenseandstockoptionplantransactionstotaled30.3 million in Q3 2023[16] Stock-Based Compensation - Stock-based compensation expense and stock option plan transactions totaled 30.5 million in Q3 2024[12] - Stock compensation expense related to stock option awards increased to 24.8millionfortheninemonthsendedSeptember30,2024,upfrom24.8 million for the nine months ended September 30, 2024, up from 22.7 million in the same period in 2023[28] - The company granted 105,600 RSUs with a total fair value of 10.8millionduringtheninemonthsendedSeptember30,2024,comparedto119,570RSUswithatotalfairvalueof10.8 million during the nine months ended September 30, 2024, compared to 119,570 RSUs with a total fair value of 10.3 million in the same period in 2023[30] - Restricted stock expense associated with the Hero Acquisition decreased to 17.2millionfortheninemonthsendedSeptember30,2024,downfrom17.2 million for the nine months ended September 30, 2024, down from 21.9 million in the same period in 2023[31] - The company granted 19,960 PSUs to members of the Executive Leadership Team in the first quarter of 2024, valued at a weighted average grant date fair value of 122.24perPSU[32]DebtandFinancing−Long−termdebtrepaymentsamountedto122.24 per PSU[32] Debt and Financing - Long-term debt repayments amounted to 200.6 million for the nine months ended September 30, 2024, consistent with 200.0millioninthesameperiodof2023[10]−Thefairvalueof3.15200.0 million in the same period of 2023[10] - The fair value of 3.15% Senior notes due August 1, 2027 decreased to 415.1 million as of September 30, 2024, compared to 406.9millionasofDecember31,2023[37]−Thenotionalamountofforeignexchangecontractsdesignatedashedginginstrumentsdecreasedfrom406.9 million as of December 31, 2023[37] - The notional amount of foreign exchange contracts designated as hedging instruments decreased from 228.9 million on December 31, 2023, to 219.7milliononSeptember30,2024[40]CommitmentsandGuarantees−Thecompanyhasanannualcommitmenttopurchase240,000tonsofsodium−basedrawmaterialsattheprevailingmarketpriceunderapartnershipagreement[65]−Thecompanyhadcommitmentsofapproximately219.7 million on September 30, 2024[40] Commitments and Guarantees - The company has an annual commitment to purchase 240,000 tons of sodium-based raw materials at the prevailing market price under a partnership agreement[65] - The company had commitments of approximately 408.6 million as of September 30, 2024, including raw materials, packaging supplies, and services[66] - The company had guarantees and letters of credit totaling 6.0millionasofSeptember30,2024[66]−Thecompanydeferredanadditionalcashpaymentof6.0 million as of September 30, 2024[66] - The company deferred an additional cash payment of 20.0 million related to the Zicam Acquisition, payable five years from the closing if not used for indemnity obligations[67] - The company deferred an additional cash payment of 14.0millionrelatedtotheTheraBreathAcquisition,withinstallmentsof14.0 million related to the TheraBreath Acquisition, with installments of 2.0 million paid in January 2024, 7.0milliontobepaidinDecember2024,and7.0 million to be paid in December 2024, and 5.0 million in December 2025[68] - The company deferred an additional cash payment of 8.0millionrelatedtotheHeroAcquisition,payablefiveyearsfromtheclosingifnotusedforindemnityobligations[69]OtherFinancialMetrics−Thecompany′sseven"powerbrands"representapproximately708.0 million related to the Hero Acquisition, payable five years from the closing if not used for indemnity obligations[69] Other Financial Metrics - The company's seven "power brands" represent approximately 70% of its net sales and profits[79] - The company received a favorable tariff ruling from the U.S. government, resulting in 37.6 million in cash refunds (pre-tax) for the nine months ended September 30, 2024[81] - The company's equity in earnings from affiliates Armand and ArmaKleen totaled 3.0millioninQ32024,downfrom3.0 million in Q3 2024, down from 1.7 million in Q3 2023[96] - The Graphico acquisition contributed 1.9% to Consumer International net sales growth in Q3 2024[103] - Excluding divestitures, SPD net sales increased in Q3 2024 due to growth in animal nutrition and specialty chemicals segments[109] - Corporate segment income before income taxes rose to 3.0inQ32024from3.0 in Q3 2024 from 1.7 in Q3 2023, while the nine-month income decreased to 7.2in2024from7.2 in 2024 from 8.1 in 2023, following the sale of a 50% interest in Armakleen[111] - The cash conversion cycle increased by 2 days to 29 days in Q3 2024, driven by a 6-day increase in DSO and a 5-day decrease in DIO[119]